Refinancing isn’t just for homes. Refinancing your car loan can save you a lot of money, too. Here’s how to refinance the right way:
Compare interest rates. If the rate on your car loan is higher than current rates, you are a candidate for refinancing. But the rate you qualify for depends on your credit score. If your score isn’t high enough right now, don’t despair. As your credit score improves, so should your chances of nabbing a better rate. And don’t forget: Each time you shop around for a car loan, you’ll want to compare the rates and fees of several reputable lenders, including local banks and credit unions.
Look at the length of your loan. You can get long-term auto financing that dramatically reduces your monthly payment. But the longer the term of your loan, the greater the risk that you’ll end up owing more than your vehicle is worth by the time you’re ready to get another car. Think twice about extending your car loan out beyond three or four years.
Take some time to decide. Carefully review loan documents before signing. Make sure you know your interest rate, the total amount you’re borrowing and the length of your loan before you sign on the dotted line.